Hedge funds pitch takeover of Frannie

Seeking Alpha – The closest thing to a cash offer from the private sector to help reorganize housing finance in this country, a number of hedge funds have proposed converting their $34.6B of preferred stock of Fannie Mae (FNMA) and Freddie Mac (FMCC) and helping to underwrite a $17.3B rights issue.

“We plan to put up real money, this is not just a trade,” says one member of the group, which says the plan brings in private capital while leaving taxpayers with legacy mortgage guarantees from which they can profit as housing continues to recover.